Mom in debt. Needs help. Why is credit counseling/consolidation bad?

[UNCjigga]

So my mom's got two credit cards with a $6000 balance each and a third card with $700 on it. She's never missed a payment, but sometime in May her Equifax credit report got a red flag in it and her score went down (incidentally, this is AFTER she had FIXED her report at another bureau after some sleazy company screwed her over.) After the red flag and her score dipping, all 3 cards hiked her rate to between 18-19%!!! Payments are becoming more difficult to make.

So my mom froze her spending on the two high balance cards, and got another job, but its just not enough. She's divorced and working two PT jobs now (and she's old.) I'm the only one willing to help her right now and I don't know sh*t about these problems (except not to get into them myself.)

I've seen lots of ads about credit counseling and consolidation. They make it sound so wholesome and good that you know its gotta be bad!! Actually, I've heard a few of you say bad things about it as well!

I think her best bet is to get some sort of line of credit or transfer her balances to another card with an ultra-low intro rate, but of course with the red flag she can't do that. In fact, even Lending Tree turned her down for a consolidation loan. The lending tree report did tell us that if we called an Equifax 1-800 number they are obligated to send us a free report with no strings within 60 days of Lending Tree's notice. So she's applied for that, but in the meantime, is there anything we can do?

 

[conjur]

Have her call the companies herself and work out lowered payments, suspended late fees, lowered or zeroed interest for, say, a six-month period so she can get caught up and then carry on from there.

And pick up a copy of Financial Peace by Dave Ramsey.

 

[AlienCraft]

Originally posted by: conjur
Have her call the companies herself and work out lowered payments, suspended late fees, lowered or zeroed interest for, say, a six-month period so she can get caught up and then carry on from there.

And pick up a copy of Financial Peace by Dave Ramsey.

Some companies will not accept phone call negotiations. I had to send a certified letter to one of my CC companies for them to even talk to me about it.

 

[Babbles]

Call them up, worked for me. Those counseling agencies are a major rip off and your credit report will take a hit if you use them as well.

 

[DaveSimmons]

If she's never missed a payment, I'd guess the CC companies should not have been able to raise her interest rate on the existing balances, only perhaps for new charges. I wonder though (since she's having trouble making payments) if perhaps she did make at least one or two paymnets late?

If she has made all of her payments on time, a nice, polite letter sent certified to customer service at each of the CC companies asking them to return her existing balance to the old rate and perhaps even credit her back for the extra interest might be worth a try.

It's often better to have a paper trail instead of depending on phone calls to people.

re: consolidation services:
Many of them are sleazy operations that rip you off with high interest and / or huge loan fees. Your monthly payment might go down, but then it takes 20 years to pay the debt off. Even some of the ones that say they are "non profit" are really paying huge salaries to the CEO / owner and other staff.

 

Go here NFCC.org Look for a affiliate in your area. These are legit and are supported by donations, this is optional. You we be required to purchase the materials for the when credit is due home study course usually around 50$. They arrange a 30 to 60 month payoff plan depending on the size of your debt. Part of its through negotiations with your creditors and the rest is by helping you secure a low interest rate consolidation loan later on after you have shown good faith and been consistant with your payments. And this does not screw up your credit.

 

[IamElectro]

Originally posted by: DaveSimmons
If she's never missed a payment, I'd guess the CC companies should not have been able to raise her interest rate on the existing balances, only perhaps for new charges. I wonder though (since she's having trouble making payments) if perhaps she did make at least one or two paymnets late?

If she has made all of her payments on time, a nice, polite letter sent certified to customer service at each of the CC companies asking them to return her existing balance to the old rate and perhaps even credit her back for the extra interest might be worth a try.

It's often better to have a paper trail instead of depending on phone calls to people.

re: consolidation services:
Many of them are sleazy operations that rip you off with high interest and / or huge loan fees. Your monthly payment might go down, but then it takes 20 years to pay the debt off. Even some of the ones that say they are "non profit" are really paying huge salaries to the CEO / owner and other staff.

Consolidation services are crooked as a dogs hind leg.
I worked in a credit office for a while several years ago and the only thing these sevices did was screw people they would get the rate lowered yes but to like 15% and your payment was fixed but the accounts would be closed and if customers missed or were late on payment the fees where crazy and the creditor would increase the rates again 21-24% leaving people back to they started.

You and your mom should maybe talk to a financial advisor and have them contact here CC companies they create the paper trail that helps correct these problems. The plus is she gets to look the person in the face and they sit down and look at all the bills and her income and they work out a game plan. I have had several friends talk to fianancial advisors after they got out of school and they helped them out greatly mind you it cost several hundred dollars and took alittle while but they were alot better off.

Just remeber help is not a phone call away out of debt as these services claim.

 

[Cyberian]

Mom in debt. Needs help.

Does she own her onn home?
A home equity loan should be possible, even with a less than perfect credit rating.

 

[tcsenter]

Don't communicate by phone. Its ok for a representative who is working on your behalf to do business by the phone, but don't do it by phone on your own behalf WRT credit problems. Communicate primarily by writing.

Credit counseling/consolidation isn't always bad. It depends on the service who you go through. Some are basically taking advantage of people with credit problems.

How to go about finding out who is and isn't an ethical and fair counseling/consolidation service, I don't know. I wish I did.

 

[The Stigenator]

try CCCS.org (Consumer Credit Counselling Service or whater its called).. Its a national one.

I know someone who is on it. Dont know what happens if you end up being late to your payment, but i assume you can call and let them know your going to paying late for some reason.